Columbian Fin. Corp. v. Stork

• Decision Date: 25 July 2017
• Docket Number: No. 16-3339,16-3339
• Parties: COLUMBIAN FINANCIAL CORPORATION, Plaintiff - Appellant, and THE COLUMBIAN BANK & TRUST COMPANY, Plaintiff, v. JUDI M. STORK, in her official capacity as Deputy Bank Commissioner of Kansas, and in her individual capacity; DERYL K. SCHUSTER, in his official capacity as Acting Bank Commissioner of Kansas, Defendants - Appellees, and OFFICE OF THE STATE BANK OF COMMISSIONER OF KANSAS; EDWIN G. SPLICHAL, in his individual capacity; J. THOMAS THULL, in his individual capacity, Defendants.
• Court: U.S. Court of Appeals — Tenth Circuit

COLUMBIAN FINANCIAL CORPORATION, Plaintiff - Appellant,andTHE COLUMBIAN BANK & TRUST COMPANY, Plaintiff, v. JUDI M. STORK,in her official capacity as Deputy Bank Commissioner of Kansas,

and in her individual capacity;

DERYL K. SCHUSTER,

in his official capacity as Acting Bank Commissioner of Kansas, Defendants - Appellees,

and

OFFICE OF THE STATE BANK OF COMMISSIONER OF KANSAS;

EDWIN G. SPLICHAL, in his individual capacity;

J. THOMAS THULL, in his individual capacity, Defendants.

No. 16-3339

UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

July 25, 2017

(D.C. No. 2:14-CV-02168-SAC-KGS)

(D. Kan.)

ORDER AND JUDGMENT^*

Before MATHESON, PHILLIPS, and McHUGH, Circuit Judges.

The district court dismissed Columbian Financial Corporation's first amended complaint for lack of jurisdiction, holding that Columbian's federal-court claims against state officials were precluded by sovereign immunity under the Eleventh Amendment. In reaching this determination, the district court rejected Columbian's contention that it had jurisdiction over Columbian's complaint pursuant to the exception to sovereign immunity enunciated in Ex parte Young, 209 U.S. 123 (1908). Exercising jurisdiction under 28 U.S.C. § 1291, we hold that Ex parte Young applies to Columbian's procedural due process claim in which it alleges a failure to provide a meaningful hearing and seeks an injunction ordering a constitutionally adequate hearing. We also hold that this claim is not moot. We therefore reverse and remand for further proceedings consistent with this order and judgment.

I.

Columbian alleged in its first amended complaint that it was the sole shareholder of Columbian Bank and Trust Company ("the Bank"). In August 2008, the Kansas State Bank Commissioner, Thomas Thull, issued a Declaration of Insolvency and Tender of Receivership ("Declaration"), under which the Kansas Office of the State Bank Commissioner ("OSBC") took charge of the Bank, declared it insolvent under state law, and appointed the FDIC as its receiver. That same day the FDIC sold a substantial portion of the Bank's assets.

The Bank sought judicial review of the Declaration in state court, which remanded the case to the OSBC to provide a post-deprivation hearing. Columbian intervened as a party in the OSBC hearing. Edwin Splichal, who succeeded Thull as Bank Commissioner, presided over the hearing and ultimately granted summary judgment in favor of the OSBC. When Columbian and the Bank again sought judicial review, a Kansas trial court held that the matter was moot and dismissed the appeal for lack of subject matter jurisdiction.

While their appeal of the state-court dismissal was pending, Columbian and the Bank filed this action in federal district court asserting claims under 42 U.S.C. § 1983 against Thull, Splichal, and two other OSBC officials, Judi Stork and Deryl Schuster. Alleging a denial of due process, they sought equitable remedies and damages. The district court dismissed the damages claims with prejudice. Applying the abstention principle in Younger v. Harris, 401 U.S. 37 (1971), the court dismissed the equitable claims without prejudice. Columbian appealed, and we vacateddismissal of the equitable claims because the state-court proceedings had terminated.¹ See Columbian Fin. Corp. v. Stork, 811 F.3d 390, 395 (10th Cir. 2016).

On remand, Columbian filed a first amended complaint naming as defendants only Schuster and Stork in their official capacities as Bank Commissioner and Deputy Bank Commissioner, respectively. Columbian alleged, inter alia, that defendants seized the Bank and its assets without providing Columbian with an opportunity to be heard at a meaningful time and in a meaningful manner, in violation of Columbian's Fourteenth Amendment right to due process. In its prayer for relief, Columbian sought:

a. judgment in its favor and against Defendants;

b. an injunction requiring Defendants to provide [Columbian] a hearing before a neutral magistrate at which it may pursue injunctive relief sufficient to remedy the injuries [Columbian] has suffered arising from the issuance of the Declaration, the seizure of the Bank, and the appointment of the FDIC as receiver;

c. the award of attorneys' fees and costs as provided for under 42 U.S.C. § 1988(b);

d. the award of such other relief as this Court may deem just and proper.

Aplt. App., Vol. I at 29.

The district court dismissed Columbian's complaint as barred by sovereign immunity. Columbian Fin. Corp. v. Stork, 216 F. Supp. 3d 1267, 1275 (D. Kan. 2016). Regarding the Ex parte Young exception, the court held that Columbian failed to allege an ongoing violation of federal law, nor did it pray for prospective injunctive relief. Id. at 1273. Noting that the Bank had already received a post-deprivation hearing, the court reasoned:

The substance of the plaintiff's claims is completely focused on the past—past decisions and past proceedings of the OSBC which had a past effect on the plaintiff. The plaintiff does not allege any ongoing or repeated denial of property rights as to trigger future compliance, that is, a new or another due process hearing. Indeed, as the defendants point out, the bank and its assets seized in 2008 no longer exist.

Id. at 1274 (citation and internal quotation marks omitted). The district court stated that, "[w]ith the Bank and its assets no longer in existence, the plaintiff does not articulate what prospective injunctive relief could offer a remedy to past injuries." Id. Thus, it concluded that the only relief available to Columbian was "a declaratory judgment that the defendants violated [its] due process rights years ago." Id. The court held that such a claim was barred by the Eleventh Amendment. Id.

II.

We review de novo the district court's Eleventh Amendment immunity determination. Reames v. Okla. ex rel. OK Health Care Auth., 411 F.3d 1164, 1167 (10th Cir. 2005). Although states enjoy sovereign immunity from suit in federal court, that immunity is not absolute. Muscogee (Creek) Nation v. Pruitt, 669 F.3d 1159, 1166 (10th Cir. 2012). "[U]nder Ex parte Young, a plaintiff may bring suitagainst individual state officers acting in their official capacities if the complaint alleges an ongoing violation of federal law and the plaintiff seeks prospective relief." Id. (citation omitted). To determine whether the Ex parte Young exception to sovereign immunity applies, a federal court need only conduct this "'straightforward inquiry.'" Id. at 1167 (quoting Verizon Md. Inc. v. Pub. Serv. Comm'n of Md., 535 U.S. 635, 645 (2002)). Thus, our analysis of subject matter jurisdiction under Ex parte Young "does not turn on whether the complaint states a valid cause of action." Id. at 1168 (distinguishing between dismissal for lack of jurisdiction and dismissal on the merits); see also Verizon Md., 535 U.S. at 646 ("[T]he inquiry into whether suit lies under Ex parte Young does not include an analysis of the merits of the claim.").

A.

The parties dispute whether Columbian's first amended complaint alleges an ongoing violation of federal law and seeks prospective relief. Columbian argues that the right to be heard in a meaningful manner is a fundamental requirement of due process guaranteed by the Fourteenth Amendment. It alleges that defendants' violation of its due process rights is ongoing because it still has not received a meaningful hearing. Aplt. App., Vol. I at 26. More specifically, Columbian seeks a hearing before an impartial hearing officer² after sufficient opportunity fordiscovery.³ It asserts that it requests only prospective relief in this action in the form of an injunction requiring Defendants to comply with federal law by providing a hearing with constitutionally adequate procedural protections. According to Columbian, when a federal plaintiff alleges that a state official has refused to do an act that federal law requires, an injunction requiring the act to be performed has long been held to be proper relief under Ex parte Young.

Defendants argue that Columbian has not identified any ongoing violation of federal law because "[a]ll actions giving rise to this case are in the distant past" and "the Bank no longer exists." Aplee. Br. at 9. They posit that Columbian is seeking relief, not permitted under Ex parte Young, in the form of a declaration that defendants' past conduct violated federal law. Defendants argue that Columbian's requested relief is akin to and would have the same effect as a retrospective damages award.

B.

We conclude that Ex parte Young applies because Columbian alleges an ongoing violation of federal law and seeks from the federal court only prospective relief and other relief ancillary thereto. Contrary to the district court's and defendants' apparent reasoning, the fact that Columbian is "seeking to right a previous wrong [does] not disqualify the action from the Ex Parte Young exception."Opala v. Watt, 454 F.3d 1154, 1158 (10th Cir. 2006) (internal quotation marks omitted). For example, in Buchwald v. University of New Mexico School of Medicine, 159 F.3d 487, 496 (10th Cir. 1998), we held that the plaintiff "alleged an ongoing constitutional violation in the form of her continued exclusion from [the state medical school]." And her prayer for an injunction ordering her immediate placement in that school qualified as a request for prospective equitable relief from an ongoing constitutional violation. See id. at 495-96. Much like defendants' argument here, the defendants contended in Buchwald that, because the plaintiff "[sought] only to remedy past wrongs . . . the relief requested is exclusively non-prospective." Id. at 495 n.5. We rejected this contention, explaining that

[t]he existence of a past harm does not convert a prospective injunction into retrospective relief barred under the Eleventh Amendment. Just as claims for reinstatement are treated as prospective relief when the plaintiff alleges that he or she was terminated for unconstitutional reasons, so is the claim for an

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